Recordation and Transfer Taxes – Transfers of Property Between Related Entities – Exemption: Summary of Bill Passed by the 2013 General Assembly

J. Paul Reiger, Jr. of First American Title Insurance Company and John P. Machen of the Baltimore City Law Department contributed the following summary of SB202/HB372 passed during the 2013 session of the Maryland General Assembly:

This bill expands the existing 12-108 (p) exemptions from State recordation and transfer taxes available to corporations to include limited liability companies. Corporations and limited liability companies are now defined in the bill as “business entities.” The bill provides that transfers of real property from a parent business entity to its wholly owned subsidiary or between subsidiaries wholly owned by the same parent business entity, are exempt from State recordation and transfer taxes if the parent business entity is an original owner of the subsidiary business entity, or became an owner through gift or bequest from an original owner of the subsidiary business entity and if the instrument of writing is for no consideration; nominal consideration; or consideration that comprises only the issuance, cancellation, or surrender of ownership interest a subsidiary business entity.

Likewise, that a transfer of real property from a subsidiary to its parent business entity is exempt from State recordation and transfer taxes if the parent previously owned the real property; currently owns the ownership interest of the subsidiary and has owned that ownership interest for a period greater than 18 months; or acquires the ownership interest of the subsidiary business entity which has been in existence and has owned the real property for a period of 2 years, and provided that the transfer is for no consideration, nominal consideration or consideration that comprises only issuance, cancellation, or surrender of a subsidiary’s ownership interest.

This bill becomes effective July 1, 2013 and applies to all instruments of writing recorded on or after July 1, 2013.

Tax – Property Article 12-108(p) and 13-207(a)(9)

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